Creditors' Meetings
Author:
James Stafford
[Fulltext] When a company wishes to go into liquidation, it is obliged to convene a Creditors' Meeting which creditors are entitled to attend.
Prior to the passing of the Company Law Enforcement Act 2001, some creditors were reluctant to attend Creditors' Meetings as the rules made it very difficult for them to vote in their choice of Liquidator. This has changed under the new Act and creditors may now vote in their choice of Liquidator provided they have votes representing majority in value.
Why Attend?
It is considered good credit management practice to attend the Creditors' Meetings of your customers. It sends a clear message to your other customers that you have a practice of attending and asking appropriate questions. Such a policy will help reduce your level of bad debts.
By attending Creditors' Meetings you can ask whether any stock you supplied under Retention of Title can be recovered. I have seen a number of instances where creditors have been told in advance of the Creditors' Meeting that none of their stock remains, only to find out at the Creditors' Meeting that their stock was actually moved off site for "security" reasons. Such "revelations" come about as a result of other creditors having more background information.
The Creditors' Meeting provides an opportunity for you to assess whether the directors have engaged in reckless or fraudulent trading. While legal actions in respect of such trading is normally initiated by the Liquidator, it is possible for creditors to sue the directors personally for such trading.
By attending the meeting you can also assess the prospects of any dividend being paid. If it is clear that the debt is not going to be recovered, then at least you can issue a credit note to recover the VAT.
Sometimes a company's liquidation can have a domino effect on your other customers. By obtaining a copy of the Statement of Affairs, you can determine if any other customers have been affected.
If you received a personal guarantee from the directors of the company you can ask if they have given other personal guarantees. If the directors have given a multitude of personal guarantees, it may not be worth suing them.
One of the benefits of attending Creditors' Meetings is that it gives you the opportunity of meeting other credit managers, and discussing in an informal fashion whether any of your other customers are in difficulty.
Under the new Act, you now have a real say in who may be appointed Liquidator. It is in your interest to have a competent, independent Liquidator appointed so that the prospects of recovering your losses are improved.
You may not have enough time to attend Creditors' Meetings, especially if they are held near month-end. If this is the case, you should ask an insolvency practitioner to attend the meeting on your behalf. Insolvency practitioners do not charge for attending Creditors' Meetings, and will send you a report on the meeting.
Completion of Proxies
If you wish to attend the Creditors' Meeting, it is important that you properly complete the proxy. If your company is a Limited company, then the General Proxy must either be impressed with your company seal, or you must insert the following phase directly beneath your signature: "Duly Authorised Officer of the Company".
The General Proxy must arrive at the registered office of the company by 4.00pm on the day prior to the meeting.
Ten Questions to ask at the Creditors' Meeting
1 Who prepared the Statement of Affairs? (The Statement should have been prepared by the company's directors with the assistance of the company's professional advisors. If the Statement was prepared by the company's choice of nominee for Liquidator, then the Liquidator may have compromised his independence.)
2 How was the company's choice of Liquidator introduced to the company? (The Companies Acts require that the Liquidator of a company be independent of the company.)
3 When did the company cease trading? (The company's directors should have placed the company into Liquidation as soon as possible after the company had ceased trading)
4 When did the directors first realise the company was insolvent? (A very loaded question! If the directors admit that they knew the company was insolvent for some time, a creditor may hold them personally liable for reckless trading.)
5 Provide details of all major payments made in the past three months? (The answer to this question may help to identify if the company has made any fraudulent preferential payments)
6 When was the last set of accounts prepared? (Directors are required to prepare accounts on a regular basis. Failure to do so may indicate that the directors engaged in reckless trading.)
7 Did the Bank have personal guarantees as security for the company's lending? (If the Bank's lending has recently been paid off, the existence of such a guarantee may indicate a fraudulent preferential payment which may be recovered by the company's Liquidator.)
8 Who owns the building that the company operated from? (Sometimes the directors own the company's premises personally, and thus questions can be asked as to whether fair market rent was paid etc).
9 Will the directors continue the business through another company? (It may be useful to know if the directors intend to buy the company's assets back from the Liquidator)
10 Specific questions should always be asked on the Statement of Affairs presented to the meeting, especially by reference to any previous audited accounts filed at the Companies Registration Office. (Such questions may help determine if any assets have been excluded from the statement.)
Accountancy Ireland Vol 34 No 1 February 2002
Recent Comments:
At
4/23/2009 12:38:09 PM
Jim Stafford
said:
Any claiming to be a creditor may attend a creditors meeting. One of the reasons they are advertised is to ensure that creditors are aware of the meeting.
At
4/22/2009 7:22:41 PM
Danielle Scully
said:
I am owed 850 euro from jim langans and there creditors meeting is on monday but i didnt recieve a letter can i still attend that meeting